The "ABC" of Legal Liquor in Virginia

ABC stores are commercial operations, often located in strip malls

ABC stores are now standard self-service, customer-based facilities

In stereotypes about the "Old South," rich folks stand on the plantation veranda near the boxwoods, leaning on the tall white columns with the brick house behind them and casually sippin' mint juleps brought by servants on silver platters. Gone With the Wind was set in Georgia, but the scenes on the plantation (Tara) reflected the lifestyle of high society of Virginia as well.

Fast forward to the first Monday in November, then jump one more day to Tuesday. If you want to go buy some bourbon for a modern mint julep, you have to go to a state-run liquor store... and it will be closed.

The first Tuesday after the first Monday in November is always Election Day in Virginia, every year. (In even-numbered years, registered voters choose 11 different representatives to the US Congress. Every 6 years, the race for one U.S. Senate seat is on the ballot. In odd-numbered years, all 100 seats for the House of Delegates are on the ballot. Every 4 years in odd-numbered years, voters make decisions on all 40 seats for the State Senate.) The state has decided that booze and elections don't mix - and the Commonwealth of Virginia controls the sale of hard liquor.

The Virginia Department of Alcoholic Beverage Control (ABC) has a monopoly on the sale of hard liquor in Virginia. The hours of operation, the products carried, the price, and the locations of ABC stores are government decisions. To reduce the chance that voters might be swayed by liquor, the ABC stores are closed on election days.

All liquor in Virginia is sold in over 350 "ABC" stores, managed by the Department of Alcoholic Beverage Control. Virginia started control of alcohol sales after Prohibition ended. In 1933, over 60% of Virginians voted in favor of ending prohibition and creating a state-controlled monopoly to manage liquor distribution and sale.

Virginia was the 29th state to ratify the 21st Amendment to the US Constitution ending Prohibition. Within two months of the Virginia vote, Utah became the 36th to ratify. Virginia authorized retail stores to sell beer and wine (over 16,000 retail licenses today), but set up state-run ABC stores with the exclusive right to sell hard liquor.1

The Virginia Administrative Code still limits advertising that uses the words Bar Room/Saloon/Speakeasy/Happy Hour, hoping to minimize the potential for excessive drinking - and wholesalers are not allowed to deliver beer/wine on Sundays "except to boats sailing for a port of call outside of the Commonwealth, or to banquet licensees."2

may not depict persons consuming alcoholic beverages, may not use cartoon characters, nor use persons who have not attained the legal drinking age as models or actors. The billboards may not be placed within 500 feet of a church or synagogue; a public, private, or parochial school, college, or university; a public or private playground or similar recreational facility; or residentially zoned property.

The top 10 products sold in ABC stores (based on total dollars, rather than total volume) are:4

2013 Rank

2012 Rank

Brand

Product Category

1

1

Jack Daniel's 7 Black

Tennessee whiskey

2

2

Smirnoff 80

domestic vodka

3

4

Jim Beam

straight bourbon whiskey

4

3

Grey Goose

imported vodka

5

5

Crown Royal

Canadian whisky

6

6

Absolut

imported vodka

7

8

Aristocrat

domestic vodka

8

7

Captain Morgan's Spiced

imported rum

9

11

Hennessy VS (1)

Cognac\Armagnac

10

9

Bacardi Superior

domestic rum

The ABC monopoly generates substantial revenues for the state. The state excise tax is 20% on distilled spirits and 4% on wine, and the ABC stores also charge 5% sales tax. In the fiscal year ending June 30, 2014, the Department of Alcoholic Beverage Control sold $801 million of product. The ABC monopoly also generate massive profits by buying alcohol at wholesale rates and selling at retail prices, generating a profit of $140 million in 2014.5

In the fiscal year ending June 30, 2012, three of the four top-selling ABC stores were located in Virginia Beach - a key destination for tourists. Store No. 256, in the Hilltop North Shopping Center, was the king of Booze in Virginia:6

No. 256, off Laskin Road, sold more than $9.2 million worth of booze. That was nearly 40 percent more than the $6.7 million brought in by the state's second-most-successful ABC store, in Vienna. Most of the store's business, manager David Warren said, comes from about 175 restaurants and bars, which must buy their liquor from the ABC agency. He said he also benefits from affluent residents of nearby neighborhoods, as well as a steady stream of tourists in search of a major shopping center.

If the state tries to make too much profit from its retail markup, customers can not go to a competitor down the street. Because the state ABC stores are the only legal places for selling hard liquor by the bottle, customers must travel across the state line to find a different price on hard liquor.

To limit that competition, Section 3VAC5-70-10 of the Virginia Administrative Code prohibits importing more than one gallon of alcoholic beverages from outside the state or from military posts with PX stores. Many Virginians working in Washington DC who plan to "stock up with cheap liquor for a party" have heard rumors of ABC agents staking out DC liquor stores, then tailing cars with Virginia plates back across the Potomac River to enforce the one-gallon import limit...

In 2010-11, Goveror Robert McDonnell tried to abolish the system of state control and privatize alcohol sales, eliminating the state monopoly on the sale of hard liqour. In the original proposal, 1,000 retail licenses would have been auctioned, tripling the number of outlets in Virginia for liquor sales. Wholesale operations would also be shifted to the private sector, and the state would sell the main ABC warehouse at 2901 Hermitage Road in Richmond (known locally as "Alcohol and Broad"). The governor claimed privatization would generate $500 million, which would be used to finance transportation projects.7

However, the governor's proposed new tax on restaurants selling alcohol was unpopular among conservatives. When the governor modified his plan and dropped that tax, outside reviewers determined that privatizing the entire ABC operation would not be revenue-neutral.

After the one-time surge of funding from selling 1,000 licenses, the state would end up receiving $47 million less annually. In the end, the General Assembly killed the proposal in February, 2011 without a hearing. The governor found a different way to raise taxes that financed his transportation agenda.8

Virginia has permitted sale of "liquor by the drink" in food establishments (as opposed to whole-bottle sales in ABC stores) only since 1968. Restaurants and the entertainment industry lobbied for that change in the 1960's. Liquor by the drink eliminated the "brown bag" requirement that customers join a private club and bring their own bottle to the restaurant in order to enjoy a drink before a meal.

Not every community in Virginia allows alcohol sales. In some rural Virginia counties, there have been odd alliances of religious opponents opposed to the use of alcohol and moonshiners who wanted to protect their business from legalized competition. Since 1968, howeve, the lure of additional tax revenue from ABC payments and especially from restaurants selling liquor by the drink has overcome the opposition in nearly every jurisdiction.

officially-dry counties are concentrated in southwestern Virginia, but all counties on the I-81 corridor are "wet"
Source: US Geological Survey (USGS) National Atlas, County Map

Virginia's Native Americans did not make alcohol, so it was a popular trade item once European colonists arrived. The colonists had a long tradition of making beer, distilling liquor from local fruit, and importing rum made from sugar cane grown on the Caribbean islands:10

Alcoholic drink was one of the few items that colonists could not live without. In a place where the water was unsafe, milk was generally unavailable, tea and coffee were too expensive for all but the very wealthy, and soda and nonalcoholic fruit juice were not yet invented, alcoholic beverages were all that colonists could drink safely.

Even so, colonist imbibed startling amounts of alcohol. By 1770, the average white man drank the equivalent of seven shots of rum per day, and an average white woman drank almost two pints of hard cider per day. Children consumed alcoholic drinks daily, as slaves likely did as well.

Cider from fruit and beer were brewed at home, primarily by women in household kitchens through the 1600's. The low-alcohol product was difficult to store, so alcohol was traded through a barter system where different chores were exchanged. In the mid-1700's, the colonists found an economic reason for large-scale distillation of hard liquor, which could be stored easily compared to beer/cider.11

After passage of a law in 1730 to create tobacco inspection warehouses, new towns developed in Tidewater. Scottish merchants came to Virginia to buy tobacco directly from the planters and especially the small farmers. The tobacco-buying Scottish merchants established small stores on Tidewater rivers to sell items to the small farmers.

The small farmers no longer needed to ask large planters to order items from England as a favor, and to wait up to 18 months for delivery. The farmers had traditionally purchased brandy from the large planters who could afford settng up a distillery. The Scottish merchants converted the farmers' credit for their tobacco sales into quick profits from the sale of merchandise to those farmers - including brandy and hard liquor in wooden casks.

Large planters such as George Washington typically sold their crop through "factors," representatives in England who charged high prices to sell hogsheads delivered to England and buy manufactured goods and luxury items as requested by the large planters. Alexander Henderson of Dumfries is known as the "Father of Chain Stores" because he opened multiple stores in separate locations to dominate business with small farmers from Stafford County to Alexandria.

The new towns also created a market for commercial sale of liquor at taverns. Alcohol production was "re-gendered" out of the kitchens dominated by women, and became a responsibility of men working in distilleries built for that particular purpose. George Washington built his in 1797, speculating that he could convert rye and corn selling at a low price into a more-profitable product. When he died in 1799, Washington's distillery was the largest in the United States.12

Washington was well-versed in the economics of converting grain into alcohol. One of the major challenges that he faced in his second term as president was the 1794 Whiskey Rebellion in western Pennsylvania. Farmers in the Ohio River watershed struggled to make a profit shipping grain east to market in Philadelphia; roads across the mountains were poor. Distilling whiskey made it far easier to transport a high-value product that would not spoil.

Washington's Secretary of the Treasury (Alexander Hamilton) convinced the US Congress to impose an excise tax on whiskey, to raise revenue to fund the Federal government. The western farmers felt the tax unfairly discriminated againt them, while tax revenues were used to benefit people living on the eastern side of the mountains. Pennsylvania farmers revolted to block tax colection, while officials in the new state of Kentucky took a simpler approach: they just refused to collect the excise tax.13

The economics of Pennsylvania and Kentucky applied to western Virginia as well. Distilling became a tradition in the Blue Ridge of Virginia, as small farmers converted high-volume, low-value wagonloads of grain into easy-to-transport barrels of whiskey. When Prohibition blocked sale of alcohol through official channels, liquor production continued, and was called "moonshining" because in theory the stills were heated at night when smoke would not be so visible.

Virginia started banning alcohol sales in 1903, when the Mann Act essentially limited sales to just urban areas. The entire state voted in favor of Prohibition in 1914, and it went into effect on October 31, 1916. Prohibition ended in Virginia in 1934.14

In 1935, the Sunset Hills dairy farm in western Fairfax County had plenty of grain, so it opened a distillery in a building that was once the town hall for Wiehle. The building had also housed the Wiehle Methodist Episcopal Church; the steeple was removed when the building was converted into a distillery.

The dairy cows ate the grain after it was used to make "Virginia Gentleman" and "Fairfax County" whiskey; the family claimed it has "the most contented cows in Virginia." Sale of the most of the Bowman farmland in the 1960's for development of Reston forced up land prices and taxes, and in 1988 the A. Smith Bowman distillery relocated to Fredericksburg.15

For years, Bowman operated the only licensed distillery in Virginia. After the General Assembly loosened the laws on farm wineries and allowed them to charge for tastings, the number of wineries in Virginia exloded. Tourism increased in rural areas near major highways, stimulating the economy and generating revenue for local governments.

Based on that model, the state also revised the laws and regulations to spur new distilleries, and by 2014 six craft distilleries were licensed in Virginia. Belmont Farm Distillery in Clarke County now sells "White Lighning" products - legally, in ABC stores.